Groome v. Freyn Eng'g Co.

• Decision Date: 14 June 1940
• Docket Number: No. 25408.,25408.
• Citation: 28 N.E.2d 274,374 Ill. 113
• Parties: GROOME et al. v. FREYN ENGINEERING CO.
• Court: Illinois Supreme Court

374 Ill. 113

28 N.E.2d 274

GROOME et al.

v.FREYN ENGINEERING CO.

No. 25408.

Supreme Court of Illinois.

June 14, 1940.

Suit by P. F. Groome and another against the Freyn Engineering Company for accounting and commissions earned. From a decree for plaintiffs, defendant appeals.

Affirmed in part, and reversed in part.Appeal from Circuit Court, Cook County; Stanley H. klarkowski, judge.

Gardner, Foote, Morrow & Merrick and Brown, Fox & Blumberg, all of Chicago (Charles LeRoy Brown, Walter M. Fowler, and Dugald S. McDougall, all of Chicago, of counsel), for appellant.

Kirkland, Fleming, Green, Martin & Ellis, all of Chicago (Weymouth Kirkland, Howard Ellis, Jay Fred Reeve, J. B. Martineau, and William H. Symmes, Jr., all of Chicago, of counsel), for appellees.

GUNN, Justice.

Appellees P. F. Groome and W. G. Stark, in 1929, brought suit against the Freyn Engineering Company in the circuit court of Cook county for an accounting and commissions claimed to have been earned on an agency contract between appellant and Groome and Stark. The bill alleged that Tarver, Steele & Company were interested in the claim and relief was prayed for all interested. Appellees obtained a decree and appellant appeals directly to this court on the ground that a construction of the constitution of the United States is involved.

The agency contract was executed by both parties in the United States, but it is claimed it contemplated performance in Russia. Appellant claims that by the law of Russia an agency contract involving the use of middlemen of agents is void. Appellant also claims that by a treaty between the United States and Russia, respecting reciprocal rights of corporations of each country to do business in the other, it was provided that the transaction of business in Russia by a corporation organized in the United States should always remain subject to the laws and regulations existing in Russia. Appellant contends that treaty became a part of the supreme law of the land under article 6 of the constitution of the United States, which makes such constitution and the laws enacted thereunder, and the treaties with foreign nations made in pursuance thereof, the supreme law of the land and binding on all the courts of the land. It is part of appellant's argument that the whole subject matter of the agency contract related to its transacting business in Russia, and that the treaty in question required such transaction of business to be subject to the laws of Russia existing at the time of such attempted transaction of business.

The treaty was made in 1904 between the United States and Imperial Russia. Treaty of June 2 5/12, 1904, 36 Stat. 2163. The Imperial government was overthrown by revolution in 1917, and the present government was not recognized by the State Department of the United States until 1933. Appellant contends that the Department of State has certified that the treaty of 1904 is still in force. Appellant claims that the treaty was continuously in force and effect throughout the years of the transactions here involved, notwithstanding the change in the government of Russia. The appellees counter by saying there was no treaty in effect from 1917 to 1933, and, if it were to be so held, it would deprive appellees of their property without due process of law.

Appellant further argues that under the decisions of the Supreme Court of the United States the effect of the recognition of Soviet Russia by the government of the United States in 1933, was retroactively to recognize the validity of all laws of the revolutionary Soviet government from its inception in so far as those laws applied to any performance in Russia of the agency contract in question.

The question as to whether there was a treaty in effect during the time involved, and whether it had any application to the controversy, involves a consideration and construction of the constitution of the United States, which gives us jurisdiction (Van Dyke v. Illinois Commercial Men's Ass'n, 358 Ill. 458, 193 N.E. 490) though later we determine the contentions made by appellant are ill-founded. Clark v. Hanson, 320 Ill. 480, 151 N.E. 369;Geiger v. Merle, 360 Ill. 497, 196 N.E. 497.

Appellees were connected with Tarver, Steele & Company, a corporation having extensive trading relations with Soviet Russia, principally in cotton. Groome was the manager of the New York office and Stark was an employee. Stark was born in Esthonia and, prior to the revolution, lived in Russia, where be became connected with substantial enterprises. About 1918, he moved to the United States and became an American citizen. The Freyn Engineering Company is a corporation doing general engineering business in metallurgical lines. A large and perhaps principal part of its business is to furnish expert engineers who prepare plans for large enterprises, such as steel plants, and supervise the construction and installation of the machinery and equipment required therein. In the latter part of 1924 the Soviet government was contemplating the construction of vast industrial plants, including steel works, under what later became commonly designated as the five-year plan.

The Soviet Republic was formed in 1923. It consisted of several States which had been formed shortly after the revolution of 1917. The constitution of the union was adopted in July, 1923. The highest body in the Soviet Republic is the Congress of Soviets. The second in authority is the Central Executive Committee of several hundred members. The administrative bodies are called the Commissariat. The heads of each of these Commissariats constitute a collective body called the Council of People's Commissioners, which apparently has legislative as well as executive functions. The Council of People's Commissars has direct supervision over the Supreme Council of National Economy, which is responsible to the Council of People's Commissars. The Supreme Council of National Economy has supervision over Russian trusts. These trusts are similar, in some respects, to a corporation. They are created by statutory charters and the capital is furnished by the government, but they trade in their own names without responsibility on the part of the government for their transactions. Among these trusts was Gipromez which was engaged in the metallurgical engineering business along lines similar to the business of appellant.

Novostal was a Russian trust whose function was the construction of steel plants. There are many other Russian agencies mentioned in the record, among which is the All Russian Textile Syndicate, Inc., which deals in cotton and cotton machinery. This was the Russian institution with which appellees had been transacting their business prior to their arrangement with appellant. The Amtorg Trading Corporation was another Russian agency; it had an office in the United States, and was supposed to be the only channel through which goods, other than cotton, could move from the United States to Russia. Both of the last mentioned agencies of Russia were corporations organized under the laws of New York.

Henry J. Freyn, president of appellant, and appellee Stark, met each other the latter part of 1924 and discussed the possibility of appellant obtaining a contract to do some of the work contemplated in Russia. As a result of these conversations a written contract was entered into between appellant and appellees, as follows:

‘This Agreement, made and entered into this 18th day of August, A. D. Nineteen Hundred Twenty-five, by and between the Freyn Engineering Company, with principal place of business at 310 South Michigan Avenue, Chicago, Ill., aforementioned Party of the First Part, and P. F. Groome and W. G. Stark, with offices at 60 Beaver Street, New York City, N. Y., Parties of the Second Part:

‘Witnesseth:

‘That the Party of the First Part by these presents does appoint the Parties of the Second Part, its exclusive selling agents for Soviet Russia, and grants to them the sole and exclusive and irrevocable representation in Russia in every respect and detail, including Engineering, Technical information, Drawings, Construction, Purchasing and/or Selling Machinery, Tools, and/or other Equipment pertaining to the Metallurgy Industry.

‘The Party of the First Part hereby agrees that it will not sell directly or indirectly any of the above described information or equipment to any person, company, corporation, or any representative of the Union Socialist Soviet Republic (Russia) except through the Parties of the Second Part, here in the United States of America or elsewhere.

‘The Parties of the Second Part hereby agree that they will not solicit inquiries from parties other than Party of the First Part, nor sell directly or indirectly any of the above described character of information or equipment obtained from parties other than Party of the First Part, to any person, company, corporation or any representative of the Union Socialist Soviet Republic (Russia).

‘All Estimates, Proposals, Offers and/or Counter-offers, made by the Freyn Engineering Company, shall include Fifteen (15) Per Cent net commission for the Parties of the Second Part.

‘Commissions shall be due and paid in proportional amounts to the cash payments received.

‘All communications, correspondence, etc., shall be done through the Parties of the Second Part. Correspondence received directly from Soviet Russia has to be in originals or copies exchanged between both parties. The Party of the Second Part is to attend to personal communications, and has to be informed if some personal communications are started directly with the Party of the First Part.

‘The Parties of the Second Part shall have the exclusive right to establish a sub-agency in Soviet Russia, when the time shall show the necessity for that.

‘The life of this agreement shall extend for a period of Two Years, from the date hereof. The Parties of the Second Part shall have the right to renew this contract upon...